¶
3 On October 17, 1977, Petitioner Robert McCrary sustained an
industrial injury to his back in the course and scope of his
employment at Missoula White Pine Sash Company (White Pine).
McCrary was working at the trim saw "pulling green
chain" when he was hit on the right side of his back
with a board. His position was a heavy duty position.

¶
4 At the time of the 1977 back injury, White Pine was
enrolled in Compensation Plan Number II under the
Workers' Compensation Act (WCA) and its insurer was
Liberty Mutual Fire Insurance Company (Liberty).

¶
8 Following the 1977 injury, McCrary returned to work at
White Pine. However, as a result of the injury, he was unable
to perform his time-of-injury position, and as a consequence
suffered actual wage loss and actual loss of earning
capacity. Liberty ultimately paid McCrary the maximum
permanent partial disability (PPD) award for this injury.

¶
9 White Pine provided McCrary with a "sheltered"
work environment. This employment did not reflect
McCrary's ability to hold a job in the normal open labor
market at any time after his back injury precluded him from
all but sedentary to light-lifting job duties.

¶
10 McCrary alleges that because of physical limitations
caused by his back injury, he was unable to return to his job
of injury and had no prospect of finding regular employment
of any kind in the normal open labor market.

¶
11 Since the 1977 back injury, no doctor has released McCrary
to return to work at regular employment in the normal open
labor market.

¶
12 Liberty has never identified regular employment of any
kind in the normal open labor market which McCrary could
perform after his 1977 back injury.

¶
13 On November 29, 1983, McCrary suffered a work-related
injury when he slipped and fell on an icy road and sustained
a right patellar fracture. At that time, McCrary worked for
White Pine as a night driver.

¶
14 Liberty accepted liability for the November 29, 1983,
right knee injury.

¶
15 At the time of the 1983 injury, McCrary earned $10.43 per
hour. McCrary's 1983 TTD and PTD total rate were $277 per
week.

¶
16 After both the 1977 and 1983 industrial injuries, McCrary
continued his employment with White Pine.

¶
17 At some point in the 1980s, Liberty began adjusting
McCrary's claim for his 1977 back injury and his 1983
knee injury out of the same file.

Missoula White Pine Sash terminated its operations in
Missoula on or about November 12, 1996. Irrespective of the
plant closure, Petitioner had (prior to closure) undertaken
treatment for his back and knee condition and could not have
continued this work in any event due to his back and knee
symptoms and limitations. Petitioner could not have continued
to tolerate the standing, walking, lifting, turning and other
physical requirements of his job.

Within
those discovery responses, McCrary asserted that he
considered his back or knee symptoms and limitations a reason
for his permanent total disability.

¶
22 McCrary has borderline intellectual functioning,
performing better than 4% of the general population on
standardized testing. He also suffers from an anxious
adjustment disorder and chronic avoidant personality disorder
together with stuttering and speech articulation problems
which profoundly interfere with his ability to interact with
others.

¶
23 McCrary is only able to read single words and short
phrases. He has difficulty: reading anything involving
sentences or paragraphs; performing arithmetic involving
fractions, decimals or percentages; following verbal
instructions; performing tasks with problem solving; and
learning a more complex task. He has a slow work speed; he is
slow to learn a new task and is anxious and fearful when
confronted with a new task.

¶
24 McCrary also has difficulty hearing, and difficulty
tolerating sitting and standing. He can lift only in the
sedentary to light physical demand level with limited
endurance and stamina.

¶
25 On July 22, 1997, McCrary requested that Liberty pay PTD
benefits retroactive to November 13, 1996. He alleged that he
had not worked since November 12, 1996, and that he was
unable to work. Specifically, McCrary's attorney wrote:

As you are aware, Mr. McCrary suffered knee and back injuries
while employed by White Pine Sash Company. Dr. Robins has
reported that knee symptoms aggravate Mr. McCrary's back.
Mr. McCrary has not worked since November 12, 1996, and is
currently unable to work. We believe he suffers permanent
total disability. In any event, he is entitled to permanent
partial disability benefits since the date of injury. We
believe this entitlement is the maximum permissible and that
it is presently past due and payable. Please acknowledge and
pay permanent total disability benefits retroactive to and
including November 13, 1996.

¶
26 On July 28, 1997, McCrary filed a Petition for
Hearing[3] regarding his October 17, [4] 1977, back injury
and November 29, 1983, right knee injury. McCrary contended:
"due to the above described industrial injuries, he
became permanently totally disabled as of November 13,
1996." In his prayer for relief, McCrary sought,
"[a]n Order stating the nature and extent of
Petitioner's disability and entitlement through the time
of hearing on this petition, " and his attorney fees and
costs.

¶
27 In its Response to the July 28, 1997, Petition for
Hearing, Liberty contended that McCrary was not permanently
totally disabled as a result of any work-related injuries,
and that he was not entitled to any PTD or PPD benefits.
Liberty also raised the affirmative defenses of laches and
equitable estoppel.

¶
28 In the fall of 1997, before any hearing on the Petition,
Liberty agreed to pay McCrary TTD benefits under a
reservation of rights while awaiting the result of
McCrary's claim for Social Security disability benefits.
Thereafter, on October 15, 1997, McCrary's attorney Rex
Palmer wrote to Liberty's attorney, Larry Jones, stating:
"[McCrary's] wages at the time of his injury were
$10.43 per hour, 40 hours per week. Sixty-six percent of this
exceeds the $277 per week total disability rate."

It is considered that the patient has 5% permanent partial
impairment of the lower extremity which is equivalent to 3%
permanent partial impairment of the whole person as regards
his patella fracture and his early patellofemoral arthritis.
Patient has had a documented lumbar strain as evidence by his
injury reports. There would not appear to be any impairment
related to such injury. It is felt that he has DRE impairment
category II as regards his multilevel degenerative disc
disease of the lumbar spine which qualifies for 5% permanent
partial impairment of the whole person. There is not a clear
cut connection in the clinical record to connect this to a
work injury per se. I have listed . . . additional
restrictions as regards climbing and jumping and repetitive
carrying as regards his work restrictions over and above the
functional capacities evaluation at the work center.

At all
times since McCrary's 1977 back injury, Liberty has
accepted liability for and paid for all the medical care for
McCrary's back including his ongoing multilevel
degenerative disk disease and related chronic pain.

¶
30 On December 19, 1997, Margot Hart, Rehabilitation
Consultant, asked Dr. Sterling whether McCrary was
permanently and totally disabled from gainful employment of
any kind due to his physical condition. Dr. Sterling wrote,
"No-[b]ut, considering all conditions, the answer would
be yes." Hart also asked Dr. Sterling whether
McCrary's back condition was related to his knee
condition. Dr. Sterling wrote, "Yes, insofar as knee
pain & resulting limp has the potential to aggravate a
back problem."

¶
31 On October 9, 1998, Dr. Sterling opined that McCrary was
not employable.

Work activities will be limited to simple, routine tasks. He
would not be expected to comprehend and follow through on
complex, detailed, or abstract instructions. He would not be
expected to be able for [sic] understand complex social
situations and therefore be limited in his ability to
interact with co-workers and supervisors. He requires
simplified verbal instructions and longer than average amount
of time to process information.

¶
34 McCrary filed for Social Security disability benefits and
alleged he was entitled to SSDI benefits as a result of both
his back and knee injuries. On September 20, 1999, McCrary
was found to be disabled pursuant to Social Security rules
retroactive to February 28, 1998. His benefit rate was $1,
079.50 per month.

¶
35 Until October 12, 1999, Liberty paid McCrary's TTD
benefits under a reservation of rights. Effective October 13,
1999, Liberty withdrew its reservation of rights and
continued to pay McCrary TTD benefits.

¶
36 On October 13, 1999, Liberty's attorney wrote to
McCrary's attorney concerning the Social Security
benefits awarded the previous month. The purpose was to
clarify whether McCrary disputed Liberty's entitlement to
an offset as the result of the Social Security award.
Specifically, Liberty would be entitled to an offset only if
the award was based on either McCrary's knee injury or
his back injury, or both. Liberty's letter references
McCrary's claim WC687-00704, which is the claim file
within which Liberty adjusted and continues to adjust
McCrary's claims for both his back and knee.

¶
37 Effective September 27, 2000, Liberty began to pay McCrary
PTD benefits at the rate of $277 per week.

¶
38 On September 19, 2001, McCrary began treatment with Dr.
James R. Burton, an orthopedic surgeon, for low-back
problems. On February 14, 2005, in response to written
questions by Liberty, Dr. Burton wrote that McCrary: suffers
from "[s]ignificant" degenerative disk disease at
multiple levels, spondylolisthesis and chronic pain; should
see his doctor every 6 months for life; may require surgery
although it is not expected; requires pain medication for his
back (Hydrocodone and Bextra), muscle spasm medication
(Flurazepan), and sleep medication (Dalmane) for life; TENS
Unit permanently; and a back brace for the rest of his life.

¶
39 On July 10, 2006, McCrary filed a Petition for
Hearing.[5] McCrary contended that the parties
resolved their dispute over his PTD status and that he was
now entitled to his attorney fees on those benefits paid and
to be paid in the future pursuant to Madill v. State
Comp. Ins. Fund.[6] Specifically, McCrary stated:

[T]he parties resolved that particular controversy (re:
Petitioner's status as PTD) and Respondent has paid
Petitioner total disability benefits continuously since that
time. As a result of settling this controversy, Petitioner is
entitled to his attorney fees on those benefits paid and to
be paid in the future.

In his
prayer for relief, McCrary sought his attorney fees on his
benefits, and his attorney fees incurred in obtaining his
attorney fees.

¶
40 In its Response to the July 10, 2006, Petition for
Hearing, Liberty contended that McCrary was not entitled to
attorney fees on benefits paid to date nor in the future, and
that he was not entitled to attorney fees or costs for the
present petition.

¶
41 In early 2007, a question arose about various gaps during
which Liberty had not paid McCrary total disability benefits
while the evidence demonstrated that McCrary had been
unemployed and totally disabled. On February 8, 2007, Palmer
wrote Jones a letter identifying the gaps and applying the
weekly rate of $277 which Liberty had been paying to McCrary
since before it withdrew its reservation of rights effective
October 13, 1999. Concerning the first "gap, "
November 13, 1996, through October 5, 1997, Palmer's
letter states that the rate for PTD was $277 per week because
Social Security did not begin until August 1998. The total
amount of PTD requested was then $13, 333.70. The associated
attorney fees were said to be $3, 333.70 pursuant to
Madill, and associated costs with the underlying
claim were about $1, 500.

¶
42 Liberty paid PTD benefits at the rate of $277 per week,
less SSDI offset, until McCrary reached his age of
retirement.

¶
43 On March 23, 2007, Palmer wrote to Debbie Daniels at
Liberty regarding the PTD payments. The letter provides, in
part, as follows:

Dear Debbie:

I am writing to follow up on your recent discussions. Since
we spoke, I have received your payment of $13, 334 to Mr.
McCrary and $3, 333 to myself. As you know, this covers
permanent total disability benefits between November 12,
1996, and October 15, 1997, a total of 48 weeks. Thank you
for your assistance on this portion of the adjustments
required by Madill (1997).

. . . .

Next, Liberty has not paid fees on the benefits which it paid
(and will pay) on total disability benefits from October 15,
1997, through retirement age of age 66 which is June 17,
2009. This can be broken down into two time frames:

I. $11, 476.11 From 10/15/97 until 8/1/98 @ $277/week when
the social security offset began (a total of 41.43 weeks).
[Referring to the weekly rate of $277 which Liberty had been
paying to Petitioner for years.]

II. $86, 631.93 From 8/1/98 until retirement age of 66 on
6/17/09 ...

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